NEW YORK (TheStreet) -- Sales of second homes are up -- way up -- as vacation homebuyers look to profit from what they see as an improving U.S. economy.
Last year, vacation home sales rose by 29.7%, mostly from affluent buyers looking either for a second home to live in or rent out.
"Growth in the equity markets has greatly benefited high-net-worth households, thereby providing the wherewithal and confidence to purchase recreational property," says Lawrence Yun, chief economist at the National Association of Realtors. "However, vacation-home sales are still about one-third below the peak activity seen in 2006."
What Yun doesn't say is that mortgage rates continue to be low relative to historical terms, giving buyers another good reason to invest in a home rental property. Thirty-year fixed mortgage rates fell again this week, to 4.26% from 4.29%, according to BankingMyWay.com.
If you take advantage of a growing economy and lower mortgage rates to buy a vacation home, make sure you go into the deal with your eyes wide open. In other words, just because you buy a vacation property doesn't mean you'll necessarily make money on it.
You can improve your profit potential dramatically by taking a few key steps in the homebuying and the management process.
So says Tom Gilmore, founder and chief executive at VacationHomeRentals.com, who offers five tips to maximizing profits from a vacation home rental:
Find a beachfront bargain. "If possible, try and purchase a home near the beach, lake -- or even [get] a home with a pool," Gilmore says. "This is a surefire way to increase the value of your rental and its popularity. Renters would rather walk to the beach than drive while on vacation, or just relax by the pool."
Be sure the price is right. "You don't want to list your rental at too high or too low a rate, so do your homework and research your competitors in the area," he says. "If your property is listed too low in a great neighborhood, it might look suspicious and turn renters away. Hotels typically maximize their revenue when they say 95% of the hotel is booked -- so try and do the same."
Hire a professional photographer. Since renters can't check out the properties for themselves, be sure to hire a professional photographer. "That makes a huge difference because renters rely on the photographs to ensure they choose the right home," he says. "It might be tempting to take pictures with your iPhone, but it is worth spending the extra cash for flawless images."
List on more than one vacation rental website. To ensure rentals year-round or at least during peak season in the area, post your home on multiple vacation home rental websites, Gilmore advises. Aim for a site that offers a free trial. That takes risk out of the equation, Gilmore adds.
Follow-up each inquiry with a phone call. "If a potential renter shows interest in your property, pick up the phone and ask if any additional information is needed," Gilmore says. "People appreciate the personal touch, and it can persuade guests to choose your property instead of going to another vacation rental site."